ALEX BRUMMER: Germans score own goal

In any battle between the speculators and states it is almost always the traders who win. The best traders are fleet of foot, whereas governments are slow and flat-footed.

Dealers understand markets whereas politicians seldom do.

This has been demonstrated with great power over the past 48 hours. Europe's cackhanded efforts to defrock the hedge fund and private equi ty indust ry was sheer protectionism.

European stock market's have been shaken by sovereign debt worries

And Angela Merkel's ban on 'naked' short-selling is in danger of undoing the fragile stability created by the European Union/IMF stabilisation plan for European bonds.

The speculators do not bet against currencies, bonds or banks for the hell of it. In almost every case they smell weakness, analyse it and jump ahead of the regulators. This was the case with toxic debts and the banks when UK hedge funds such as Odey Asset Management and Lansdowne Partners recognised the sickness at the heart of Britain's banking system and sold short.

It may have been destabilising but it speeded up the inevitable. Germany's decision to attack the short-sellers of sovereign bonds has been interpreted by the markets as weakness. The gesture was not helped when French finance minister Christine Lagarde criticised the move. Without common action across euroland, Berlin can have little hope of heading off bond bears.

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The willingness of hedge funds, casino banks and the shadow banking system to write insurance contracts, known as credit default swaps, on ClubMed bonds, has helped the banking system across Europe - most notably in France and Germany - limit exposure to default.

It is Europe's banking system that is now left naked, not the hedge funds and speculators.

The market reaction generally has been the opposite of what Merkel intended. The euro plunged 1.2pc against the dollar in European trading before reversing its losses in topsy-turvy trading.

The price of German bunds (one of the few sources of stability in euroland plunged) and equities had a torrid time with the FTSE100 down 2.7pc or 143 points. Wall Street was also unhappy and the US Treasury Secretary Tim Geithner weighed in with his criticism.

It is a mark of how distrustful investors have become of euroland that the pound and gilts gained 'safe haven' status amid the turmoil despite Britain having the worst annual budget deficit - at 12pc national output - among the advanced nations.

How nice it would be to think that this represented confidence in the new team at the Treasury. Certainly, George Osborne and David Laws sound as if they mean business.

But they have received a huge dollop of help from euroland's blundering politicians.

Land Grab

If the current mood of Britain's big quoted property companies is any guide, the attacks on hedge funds are having little impact on confidence in prime property in the City of London.

Gerald Ronson has timed the topping out and opening of his Heron Tower, off Bishopsgate in the heart of the City, to near perfection.

Rowing in behind come the big quoted beasts British Land and Land Securities, which are dusting off their plans for landmark developments in the shape of the ' Cheesegrater' and the 'Walkie-Talkie' respectively.

Rising rental values in prime London sites in the City and the West End have investors scrambling for a share of the action. Land Securities, for decades the industry leader, has 1.2m square feet of developments underway and a further 4m in the pipeline.

But like the recent general election we seem to be living through a tale of two nations. In the great Tory South-East, property prices are surging again with agents such as Savills reporting overseas investors and domestic funds extraordinarily active. But in the rest of the country it is a very different picture.

Land's forays into the shopping centre market around the nation have been far less successful and retail lettings remain week despite the thirst for space from some of the bigger grocery beasts. It is unlikely to get much better if VAT goes up to 20pc in the June 22 Budget.

Investors in the property sector had better hope that the judgement of the big quoted firms is better on the way up than it was on the way down.

Safe Haven

People looking for an inflation-proofing opportunity, after the shock rise in the retail prices index to 5.3pc, could do worse than take a look at National Savings & Investment index linked certificates.

These currently offer a return of 1 per cent above RPI, which is a good return for basic rate taxpayers and worth 12pc for those on the nasty 50pc rate.